Contract Design and Enforcement Problems in the High Value Vegetable Supply Chain in Ghana

In recent times the Ghanaian vegetable sector faces declining export volumes and a ban on major exports from the profitable European Union Markets. One of the main reasons for this ban was poor coordination and quality control between farmers and exporters in the supply chain. We examine the nature of contracting and factors that influence contractual breaches such as side-selling in the supply chain. We find that supply contracts are the main type of arrangements and are mainly governed by seasonal informal (relational) agreements. Contracts mostly specify terms such as quality and quantity of produce to be delivered and type of agrochemicals and seeds to be used in vegetable cultivation. Agronomic practices such as weed control and agrochemical application regimes as well as harvesting and transport methods are less specified. Side-selling and failure to show up to purchase contracted produce are major contractual breaches by farmers and exporters respectively. Whiles farmers mostly prefer to stay in the contract but fail to trust exporters who breach contract in subsequent trade, exporters prefer to terminate contract with farmers who breach contract as a mechanism to enforce contract. The Logit regression results show that being an older farmer, farm size, a farmer and a buyer coming from same community and frequent monitoring of farm have negative influence on side-selling whiles shorter trading relationship, proximity of farm to alternative market and a farmer being a male have a positive influence on side-selling.